When British Conservatives took over the government in 2010 in the aftermath of a recession they implemented a policy of austerity designed to reduce budget deficits. This policy, they argued would so greatly restore confidence in the British economy that consumers would rush to spend and businesses would rush to invest and hire. The actual result was that
into a second recession.
But employment in
remain strong, and the Conservatives stuck to their policy even though
other economic indicators were terrible.
Now the country is facing the
possibility of the third recession, this one if it occurs resulting totally
from the implementation of Conservative policy. Britain
The Markit/CIPS services Purchasing Managers' Index (PMI) for services, which makes up three-quarters of the UK economy, dropped to 48.9 in December - its lowest reading since April 2009 - from 50.2 in November, confounding economists' forecasts for a small rise, according to the data released on Friday.
Markit said the figures, combined with
mixed manufacturing and construction figures earlier this week, mean the
posted its worst quarterly performance for three-and-a-half years, and suggest
the economy contracted by 0.2pc in the last quarter of 2012. Britain
"The first fall in service sector activity for two years raises the likelihood that the
economy is sliding back into recession," said Chris Williamson, chief
economist at survey compilers Markit. UK
"The services PMI follows an equally disappointing construction survey for December, leaving manufacturing – which accounts for just 10pc of the economy – as the only bright spot."
A survey is not economic data, and it may be that the British economy will not enter a recession, again. But the data does not suggest any success of the policy. And what about investors and interest rates. British government borrowing costs on 10 year bonds are now slightly greater than France’s, and
is hardly the paragon of fiscal virtue.
The yield of the
10-year gilt rose 5 basis points to 2.118 per cent on Friday morning in , marginally higher
than the 2.116 per cent yield on 10-year French bonds at the time. London
As for future policy, expect more of the same. Conservatives never ever admit they were wrong, no matter how much the economy suffers. And after all, sometime between now and the year 2050 the economy may have strong growth, at which time Conservatives will crow that their policy was vindicated.